We have a 401(k) plan that allowed an ineligible employee to defer. We plan on amending retroactively to cover the document failure. There are also several other employees who will now be eligible (all involved are NHCEs). Is the only impact of this that they are included in the k and m testing? Are there any contributions to be made on their behalf?

We have a client that terminated their money purchase plan on Septermber 30. They adopted a profit sharing plan on January 1. We are going to calculate the money purchase contribution based on compensation through september 30. A cross-tested profit sharing contribution will be made. The amount of the PS contribution will be based on testing.

Can we aggregate the money purchse contribution with the profit sharing contribution for the minimum gateway and testing?

Want to be sure I'm reading the 1.457-4© regs (and the Treasury Decision 9075 preamble to the regs) correctly.

For governmental plans, the excess deferral and income earned by it must be distributed to the employee "as soon as administratively practicable" after the excess is discovered and determined. The income earned by the excess deferral is reported on Form 1099 for the year of distribution, but the excess deferral is included in gross income for the year of the deferral (presumably by way of a corrected W-2).

For tax-exempt entity plans, if the excess and the related earnings are distributed to the employee by April 15 after the deferral year, the reporting is different than a governmental plan. The income earned by the excess deferral is reported on Form W-2 for the year of distribution, but the excess deferral is included in gross income for the year of the deferral (presumably by way of a corrected W-2).

I'm only looking for a "Yes, Ken, that's correct (or incorrect)" type of answer, but if anyone knows why governmental plans report the earnings on Form 1099 while tax-exempt entity plans report the same thing on Form W-2, I'd love to hear the explanation.

Thanks,

Ken Davis

Univ. of South Alabama

The employers love the salary reduction 403(b) arrangement because they are legally not the sponsor. In fact there is no "sponsor" like there is under sections 401(k), 457(b) and 401(a). Because they are not the sponsor they have no fiduciary responsibility. The 403(b) arrangment is simply a contractual relationship between the employee and the issuer of the annuity contract or custodial account.

Having said that, what legal responsibility does the American Federation of Teachers take on when they formally endorse and sponsor a 403(b) arrangement? Probably the same as the employer, none. So if the union is not a fiduciary should it have the right to enter into a sponsoring/endorsement agreement with the 403(b) issuer?

Peace,

Joel

Have a cash balance plan that is valued monthly. Spousal consent not required if balance is less than $5000. When a participant terminates, the prior month end balance is used to determine whether a spousal consent form needs to be included with other forms and disclosures. A participant that has $4,900.00 when forms are sent, could exceed $5,000 by the time the forms are returned and processed. Do you think we should have to go back and get spousal consent if that happens? Do you know where there are any rulings or information on this?

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An employee whose spouse has a minor child (by a previous marriage) does not claim the child as a dependent. By court order the spouse is responsible for 50% of the medical expenses the child incurs. Can the employee make an election to enroll in a spending account for the expenses her spouse incurs for the child?

If a plan did not execute a "good faith" EGTRRA amendment because it incorporated the required plan changes (ie. top heavy) by reference and the sponsor did not want to adopt the more liberal limits, what does that mean going forward?

Will the plan need to amend by the end of the EGTRRA RAP (2005) to reflect the new limits?

Does the plan have a compliance issues? If not, why would anybody file under the IRS voluntary compliance program (EPCRS) and pay the fee?

I assume the interim valuations should reflect the pre-EGTRRA indexed limit (ie. 180,000)?

Any commentary extremely helpful.

Thanks in advance.

The first filing for a plan was completed in a timely manner, but there were a couple clerical errors on the form - EIN was wrong and Plan name was wrong (premium amount was correct).

Is it best to just wait until the next filing due date (10/15/04), change the EIN on the form and provide an attachment to the PBGC or should the sponsor contact the PBGC now (I'm afraid this might cause more confusion).

I believe the instructions only address amended filing for over/under payments.

Your thoughts?

Here is the scenario --

Multiemployer DB plan has provision for retroactive annuity payment to lost participants upon commencement of distributions after NRD. Want to amend the plan to instead provide for actuarially adjusted benefit to compensate for missed payment(s). Would the removal of the retroactive annuity option be a protected benefit violation?

ok, an employer in 2003 was safe harbor, they amended the plan to rescind safe harbor provisions effective 1-1-04. this was due to the fact that the board of directors did not think the money would be there to fund the safe harbor match. the plan is at this time a trad. 401k with a dollar for dollar match up to the first one percent deferred. the board now feels that they will be able to make their numbers this year and they want to make the plan "whole" by funding the match as if it was a safe harbor plan for 2004. i know that even if this is ok, they would still be subject to non-discrimination requirements. my question is, is the safe harbor match outside a "safe harbor" plan discrimnatory? can they decide later in the year to give the additional funds to the participants? seems to me the government would not mind them increasing employee pensions.

thanks

Is it permissible for separate welfare plans (health, vision, dental, etc.) to file one Form 5500? If so, can you provide your support. Thank you in advance!

I know I may sound like an idiot but can you just put your money in the s&p 500? is that a mutual fund? any comments welcome

Since the first contribution for a new plan that is effective 1/1/03 isn't deposited until 2004, should 1G be checked on the first 5500?

A participant received a hardship distribution, and the employer did not suspend his deferrals for the next six months. I am hoping for some opinions on the method of correction.

We have looked in the ERISA books and see that it says the deferrals should be forfeited and used to reduce an employer contribution, and the employee should be made whole through payroll. If this is the correction, won't the employee be taxed twice (ex. social security) - on the original payroll and on the reimbursement?

The book seemed to say that you don't want to disburse and issue a 1099-R because there is no appropriate code so that it won't have an early distribution penalty tax. Notes from a prior conference said that the distribution could be coded as a 7, so the 10% penalty would not apply. Does that sound familiar to anyone else?

Thank you!

Is there any reason as sub-S corp can't esablish an employer-sponsored HSA?

I've a beginning of the year DB plan. The termination date was 4/30/04. Originally we planned on terminating the plan as of 12/31/03, but it was held up.

On 1/1/2003, the required contribution was, lets say, $60,000. The unfunded liability was, lets say, $200,000. Around 11/30/2003, the client put into the plan $200,000 to fully fund the plan so that the termination process could begin. Well, since we couldn't terminate during that year, how do I report the excess contribution that was made during the 2003 year?

I'm sure I didn't state all the facts, so I'll be ready for some questions.

Thanks ahead of time,

Andrew

Under the safe harbor hardship rules, expenses for medical care described in 213(d) are an approved reason for hardship. When I look at 213(d)(1)(D), it states the medical care is for insurance covering medical care referred to in subparagraph (A) and (B). (A) states that medical care is an amount paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

Situation : Participant is out on medical leave for at least a year. She wants to take a hardship to pay for COBRA premiums for the next 14 months. Do COBRA premiums meet the safe harbor definition of medical care, and can you approve a request for payment for 14 months in advance??

Thanks!

I am going to quit my job soon and plan to arrange to receive my 457 investment back in the form of monthly payments. Will I be taxed as an independent contractor or more like a regualar employee, as I am now? 1) I have been told distributions will be taxed as income, will it be taxed at the regular employee FICA rate or will it be taxed at the higher self employment rate (essentially paying both the employer and employee portions)? 2)Are there any hidden problems (taxes, fees) that may arise with my plan?

Thanks for your help!

One of the adopting employers in a controlled group wants to discontinue as such. Is this the equivalent of a termination for that adopting ER? Can the participants (401k and match money) receive distributions?